Suppose that a worker in Boatland can produce either 5 units of wheat or 25 units of fish per year, and a worker in Farmland can produce either 25 units of wheat or 5 units of fish per year. There are 10 workers in each country. No trade occurs between the two countries. Boatland produces and consumes 25 units of wheat and 125 units of fish per year, while Farmland produces and consumes 125 units of wheat and 25 units of fish per year. If trade were to occur, Boatland would trade 100 units of fish to Farmland in exchange for 100 units of wheat. If Boatland no longer grew any of its own wheat, how many units of fish could it now consume along with the 100 units of imported wheat?
A) 25 units
B) 75 units
C) 150 units
D) 250 units

Question

Quizplus · Accepted Answer

Before trade, Boatland was producing 125 units of fish and 25 units of wheat for a total of 150 units of output. If Boatland no longer grows any of its own wheat, it can now use all 10 of its workers to produce fish, resulting in a total fish output of 250 units (10 workers x 25 units of fish each). Adding the 100 units of traded wheat, Boatland can now consume a total of 150 units of fish (its own production) plus 100 units of wheat. Therefore, it can now consume a total of 150 + 100/5 = 170 units of fish. However, Boatland is only producing 125 units of fish, so it can only actually consume 125 + 100/5 = 145 units of fish.

Suppose That a Worker in Boatland Can Produce Either 5